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SUBCOMMITTEE ON SECURITIES
UNITED STATES SENATE
TO AMEND THE SECURITIES EXCHANGE ACT OF 1934 TO
FOR OTHER PURPOSES
NOVEMBER 12, 13, AND 14, 1973
Printed for the use of the
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1973
COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS
JOHN SPARKMAN, Alabama, Chairman WILLIAM PROXMIRE, Wisconsin
JOHN TOWER, Texas HARRISON A. WILLIAMS, JR., New Jersey WALLACE F. BENNETT, Utah THOMAS J. MCINTYRE, New Hampshire EDWARD W. BROOKE, Massachusetts ALAN CRANSTON, California
BOB PACKWOOD, Oregon ADLAI E. STEVENSON III, Illinois
BILL BROCK, Tennessee J. BENNETT JOHNSTON, JR., Louisiana ROBERT TAFT, JR., Ohio WILLIAM D. HATHAWAY, Maine
LOWELL P. WEICKER, JR., Connecticut JOSEPH R. BIDEN, JR., Delaware
DUDLEY L. O'NEAL, Jr., Staj Director and General Counsel
STEPHEN J. PARADISE, A88istant Counsel
SUBCOMMITTEE ON SECURITIES
HARRISON A. WILLIAMS, JR., New Jersey, Chairman WILLIAM PROXMIRE, Wisconsin
EDWARD W. BROOKE, Massachusetts THOMAS J. MCINTYRE, New Hampshire WALLACE F. BENNETT, Utah JOSEPH R. BIDEN, JR., Delaware
LOWELL P. WEICKER, JR., Connecticut
HOWARD A. MENELL, A88istant Counsel
and Richard H. Paul and Wade H. Nichols, Paul, Weiss, Rifkind, Whar-
Michael E. Tobin, president, Midwest Stock Exchange; accompanied by:
George R. Becker, chairman, John G. Weithers, executive vice president,
Bunker Ramo Corp., letter received from R. J. Moore, president, informa-
tion products division.---
GTE Information Systems, letter received from Jay M. Rosen, vice presi-
dent and general counsel.
Institution Networks Corp., subsequent letter received for the record.-
Letter containing views on certain important competitive issues raised
by the NYSE and SEC, from Thomas E. Kauper, Assistant Attorney
General, Antitrust Division----
Letter to Senator Williams from James J. Needham, chairman,
Board of Directors -
Comments on S. 2519_-
forward during testimony---
proposed revisions to S. 2519_-
terstate and Foreign Commerce, House of Representatives----
sion's letter of comments to the sponsors of the composite tape plan
filed with the Commission on March 2, 1973..
sioner Owens, on behalf of the New York Stock Exchange, request-
L. Needham responding to Mr. Needham's letter of July 3, 1973.-
Garrett responding to the Commission's letter of comments on behalf
of the New York Stock Exchange--Securities Industry Association, letter from Leon T. Kendall, president, answering additional written questions of Senato
MONDAY, NOVEMBER 12, 1973
U.S. SENATE, COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS,
SUBCOMMITTEE ON SECURITIES,
Washington, D.C. The subcommittee met at 2:07 a.m. in room 5302, Dirksen Senate Office Building, Senator Harrison A. Williams, Jr., chairman of the subcommittee, presiding.
Present: Senators Williams and Biden.
We will begin hearings on S. 2519, the National Securities Market System Act. This bill is the third in a series of bills growing out of the 18-month study of the securities industry conducted by this subcommittee. The Senate has already passed S. 470, dealing with institutional membership and commission rates, and S. 2058, which regulates clearing agencies and securities depositories.
S. 2519, the bill we are taking up today, is perhaps the most important and far-reaching of the three. When enacted, it would accomplish much-needed reforms over the basic regulatory processes for the securities industry. At the same time, it would establish the foundation for a true national market system. Not since 1938 when the Maloney Act established the NASD, has the Congress undertaken such an extensive reevaluation of self-regulation and the SEC's general regulatory powers.
S. 2519 has two basic purposes.
Its first purpose is to provide for the creation of a national market system and to give jurisdiction over the system to the SEC. The application of the computer and modern communications systems to the securities markets is revolutionizing securities trading. These changes, by and large, appear to be beneficial and we should strive to remove any unnecessary competitive obstacle to their realization. At the same time, however, we must be sure that our regulatory apparatus keeps pace with the mechanisms of the markets and the methods by which securities are traded. This bill is intended to achieve such a result.
There is an active and ongoing debate within the securities industry as to the precise characteristics that a national market system should have. I do not believe that the Congress can or should step into this debate and spell out in detail what the national market's characteristics should be. In my opinion the proper legislative approach is one which establishes broad nublic policy objectives for that market and which vests in the SEC clear power to control the development of the market in accordance with the needs of investors.